The Savvy Synopsis

In the home buying process, there are all sorts of new terms that get tossed around. Do you understand what all of these terms mean and how it pertains to your home purchase? Angie is going to help you with the lingo you often hear in real estate.

While there are hundreds of real estate terms, acronyms, and lingo, which ones are most important to know? We’ll tackle a few key terms that you’ll want to know during the home buying process.

When obtaining financing, an appraisal is required. So, what is an appraisal? The buyer will pay for an appraisal so that a third-party can give an opinion on what the home is worth. This is done to make sure the lender does not take on a loan on a home that is overvalued. Sometimes this can cause problems during a bidding war if the offer price gets too high. There are different ways to handle that if the appraisal comes back lower than expected.

In mortgage terms, what is an ARM or adjustable rate mortgage? This means your interest rate can change based on where the interest rate is. This can be riskier than a fixed rate mortgage. But, there are still times when this can be in your best interest depending on your financial situation. Make sure to check with your lender to see what works for you.

Closing costs add up quick, but what does that include? Angie lists off several different things that can be included in closing costs and says that on average, closing costs typically run around three percent of the home price.

If you hear “as is” should you go running? North Carolina is actually an as is state, meaning all homes are sold that way and the seller does not have to fix anything. That said, there is a general understanding that the buyer and seller will be reasonable regarding negotiation of repairs. If it is being marketed specifically with the words “as is” you should understand that the inspection may not go well, and they don’t plan to make additional repairs.

Finally, days on market or cumulative days on market may be something to understand when buying a home. The number of days on the market could be a red flag. As a seller, you’ll want to work with an agent who has low days on the market with most homes. 

Are you in the know when it comes to real estate lingo?

Listen to the full episode or click on the timestamps below to hear Angie explain these real estate terms. 

0:38 - What are important real estate terms to know?

1:41 - What is an appraisal?

6:02 - What is an ARM vs. a fixed mortgage?

8:31 - What are closing costs?

10:10 - Is “as is” a bad term?

12:24 - What does DOM and CDOM mean?

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Angie Cole - Contact - Call: 919-538-6477

Show Transcription:

Note: This is an automated transcription. Please forgive the robots as they tend to make some (a lot of) mistakes...

Speaker 1: (00:02)
It's time for the savvy real tour podcast. I'm Walter Storholt alongside Angie Cole, the owner and broker in charge of ACole Realty serving you throughout the triangle, teaching you about the ins and outs when it comes to buying or selling a home. You can find the team online by going to eight Cole realty.com that's a C O L E realty.com or by calling nine one nine five seven eight three one two a that's (919) 578-3128 and now it's time for one of the top realtors in the triangle, Angie Cole and the savvy real tour podcast on the show today. Angie, I want to make sure that we're covering from time to time, some important real estate terms that uh, you know, kinda just help us learn more about the buying and selling process. And I once Googled or looked dump a webpage with, you know, real estate terms and I think it was like, you know, 2000 terms. There's not a lot of lingo in the business, right? Yeah.

Speaker 2: (01:04)
A lot of acronyms too. You know, we could do a whole show on it. We have to be so careful about, you know, very quickly saying our real estate lingo.

Speaker 1: (01:11)
That's a great point. Yeah, we don't, we won't get into the, the lingo that's so deep that you know, you probably will never hear that lingo in your life. Right? We do want to cover some of the buzzwords and some of the terms that will actually impact you when you go to buy or sell your home. Uh, because these things are important to understand at least at the base level so that you're familiar with them when they pop up. So by no means can we cover all of that ground in just a couple of minutes of conversation. But I've cherry picked a few to cover on today's show, Angie. So let's start off with a, an appraisal. What is an appraisal and how is that part of the buying and selling process?

Speaker 2: (01:48)
Yeah, so an appraisal, first of all, is going to give us an idea of what the home is worth. And that is based on the opinion of an appraiser. But an appraiser goes, I think, and don't quote me if I'm wrong, I think they have to have like 200 hours of shadowing another appraiser. It's not an easy license to receive, honestly. There's a lot more hours that go behind it versus being a real estate agent. So, but an appraisal is required whenever you're obtaining financing. So if you are a cash purchase, it's up to you. If you want to pay for kind of a third party appraisal, oftentimes I see if it's a cash deal or transaction, the buyer is not, you know, investing more money's into obtaining an appraisal. But if you are getting financing, it is a requirement for you to pay for an appraisal. The buyer's paying for this, the lender will order it. It's really a third party opinion of what the home is worth. And the reason why an appraisal is conducted is to make sure that the lender is not taking on a home that is honestly overvalued because when a lender takes on a loan, uh, there is a lot of risks that go along with financing a home and lending that money to a buyer. So the lender needs to be reassured that the money they're lending out the home is worth that should the buyer default.

Speaker 1: (03:08)
And that's really where you see the problems with appraisals pop up, right? If, if those two numbers,

Speaker 2: (03:14)
yeah, many times, you know, we can list a home and then it's going, uh, there's multiple offers and very quickly, you know, we had that conversation, Sam, the listing agent, I had that conversation with the buying agents on the other side and I say, Hey, is your buyer prepared to make up the difference? Should the home not appraise? Because I can bet you as not appraising, right? Because we listed it where it should be based on comparables. And so by the way, when looking at comparables, we do exactly what an appraiser would do. The appraiser is going to first of all start off in the neighborhood if possible. If they need to, they'll start to go a little bit outside of the neighborhood, but they need to look at similar area, similar square footage, similar style. Also, they try to look at similar age and they never got past a year in closed sales.

Speaker 2: (04:00)
So, you know, although we want to make the purchase price, make ends meet, they can't pull a random home from 10 miles away that closed two years ago. That's not how appraisals work. But they're Ken and a lot of times there are issues that pop up when it comes time for the appraisal. You know, sometimes we're expecting there to be appraisal issues and the appraisal comes in low other times or not expect to get, and I just had one of those recently where both myself as a listing agent and the buying agent, we were in shock when an appraisal came in a little low just based on the comparables that we use. But you know, we have to remember that again it is a third party and them giving their opinion based on, you know, information, but we might not always see eye to eye. So then when something like that happens, you know, their price can be renegotiated. Maybe the seller has to drop the price down to appraisal value. Maybe the buyer has to come up with a difference. There's different ways to handle that, but you know, that can, you know, throw a little little wrench in the transaction from time to time.

Speaker 1: (04:59)
Yeah. And it can work the other way too where we, um, you, you get pleasantly surprised. I remember when we sold our house in Durham, we had talked with you and Lao Reagan, well, there was just a small concern because of how far above list price we had. We had jumped that it might not appraise, but then it did. And so we were all, you know, please. Yeah. That never, never hurts to have the surprise go that direction. But you wouldn't say tons of problems with appraisals, but it's just, it's an issue that's out there that has navigated around sometimes.

Speaker 2: (05:29)
Yeah. It's not, it's not like we run into these issues every other day, but you know, I would say probably one in 10, one in 15 we have a little bit of a hiccup with appraisals. So it's not uncommon. Not uncommon. Again, it's such a strong market. Like we're in here in the triangle where the values are just continued to appreciate. You know you have to have other homes that have recently sold that justify that price, so that's where you, you run into those hiccups. Usually

Speaker 1: (05:52)
the homes that are setting the new pricing trend might be the ones that struggle with that issue compared to ones that follow after? Yes. Yes. Okay, cool. All right, so there you have it, the skinny on appraisals. What about, let's talk about the mortgage world for a moment. There is adjustable rate mortgages, arms, a RMS. You talked about those acronyms are a RMS and then we have fixed mortgages. Some folks may know the difference already between the two but what, what's the big difference between the two in the real estate world?

Speaker 2: (06:19)
Yeah, I mean the biggest thing when you have a fixed mortgage, your interest rate is your interest rate. It will not fluctuate. So you are pretty much in the sense in a contract and the weather or the interest rate is 3.75 3.75 will be for the life of the loan way or if it's an arm and adjustable rate mortgage, that means that currently you have a fixed rate but maybe it's a five year or seven year, 10 year arm. Whenever it's time for that to be revisited, your interest rate can change and it's based on where the current market is in that moment. So, um, maybe it could be for the better, maybe it could be for the worst, but you know, an arm is definitely riskier versus a fixed rate, but you have to look at all sides of it. You know, I see oftentimes where someone goes to buy a home and they know that they will be moving in the next three to five years, they're buying this home for short term investment and with an adjustable rate mortgage, they can actually get a better interest rate. So maybe it's in their best interest to do an arm and they get a lower interest rate knowing they're selling the home anyways before that five years is up. So it really depends on your specific situation. There's not one way that's better versus the other. It really depends on, you know, your financial situation, how long you plan on being in that home. And really, you know, speaking with a mortgage broker, my lender about that is the way to go.

Speaker 1: (07:45)
What would you say is most typical for your clients? The fixed,

Speaker 2: (07:48)
I would say affects, yeah, I would say affects, but you know, an arm has really helped some people to get into a home that you know otherwise could it, you know? So there's a lot of great programs out there that can be tweaked around your specific situation.

Speaker 1: (08:00)
Okay. Very good. Adjustable rate versus fixed rate mortgages. Good to know those elements. By the way. Again, if you want to pick up that mortgage app on your phone where you can learn more about mortgages and lending and that side of the equation, you can text the word lending to the number five five five eight eight eight and we'll text you a link to download a local mortgage app that lets you get pre-qualified and find out more information about that entire process. Just text the word lending to the number. Five five five eight eight eight. All right, closing costs, Angie, what all goes into closing costs? How much can we expect to pay in that part of the buying process?

Speaker 2: (08:39)
Yeah, so, okay, so closing costs, first of all, lots of things, right? So if you're getting financing, typically there's going to be, you know, a fee that is charged from your mortgage lender. You're going to have a closing attorney fee. You can have other things like inspection costs, survey, any of your prorations. So for example, Perreta taxes, prorated insurance, title insurance, maybe prorated HOA dues. So on average are kind of the norm. They typically say around 3% but as you go up and price point is not necessarily always 3% so you're buying $1 million home. I'm not saying that your closing costs will be 30,000 okay. But that's where your lenders should step in and be able to give you a good faith estimate showing you the breakdown of what you can expect for closing costs. So yes, there is a lot of things that go into your closing costs and that makeup that I remember. The big thing to remember, and we see this issue from time to time, especially when it's a first purchase, a first time home buyer, your closing cost is different from your down payment. Okay? So if you need to put a down payment in order to qualify for our home, that is separate from your closing costs and make sure you're well aware of the total amount that you need to bring to the closing table.

Speaker 1: (09:53)
No, that's great point Angie. And I'm good to know that some closing costs go up proportionately with the home price. Others do not. And that's why it's not quite an easy percentage to give because it does vary with the different prices of the home and that kind of thing. But it gives us a good bracket to be aware of. What about the word as is another important term? I feel like that's a bad word in the real estate world,

Speaker 2: (10:15)
you know, um, first of all we need to remember that the North Carolina real estate contract States that all homes are being sold as is. Okay. So it is understood that this is a buyer but we're state and you are going into that home and the seller does not have to agree or fix anything. But there typically is an understanding in our market that buyer and seller will be reasonable when it comes to negotiation of repairs. But if you see on an MLS and it's public remarks or in the agent only remarks that your agents should be sharing with you and it States home is being sold as is. If you see those words, you really, really, really need to be aware. Um, because typically, well, what that really means is the sellers making you aware that, okay, you go under contract this on this hub, they are not fixing anything.

Speaker 2: (11:06)
And so make sure, make sure, make sure that you almost do your due diligence up front even before you make an offer on that home and be prepared for what you're about to encounter. Typically I see when a home is be in work at it marketed as is, it means that we're expecting for the inspection report probably be nasty. Okay. And I feel like that was just a Hornet County word. I said nasty. But uh, we're expecting for that inspection report to be just a messy one. Probably pretty lengthy. And so we're asking you to make your offer based on the understanding that Hey, it's probably going to be, you know, a mess of an inspection report, but we are letting you know, we're not fixing anything, so do not come back to us after the point and try to renegotiate. I like that Masti home nasty. I know it's going to be, it's going to be one of those 50 pagers that's going to be a hard neck County nasty [inaudible]. Yep.

Speaker 1: (12:04)
Too funny. All right. It's there. You have it as is another good one to just be aware of. And a that's a good to know. That's a little trivia there though, Angie, that all contracts actually are technically as is contracts or at least at the outset it with just that underlying understanding that there's going to be some negotiating that goes on. But interesting little tidbit there. All right Angie, last term at least for now a days on market, what is that first of all and then why is it helpful as a buyer to know the days on market for home?

Speaker 2: (12:34)
Yeah, so first of all, we have two types of guests days on markets. We have days on market Dom and then we have sea Dom, which is, which is Q lifted days on the market. Okay. So days on the market, we'll restart anytime a home is relisted, whether it be with a new agent with the same agent, but anytime you have a new listing agreement. So then it must be a new MLS number. Days on the market, go back to zero, but cumulative days on the market, we'll keep clicking. Okay, the clock keeps going unless you've been off the market for our total of 31 days. So say for example a homes listed with one agent, I then take over the listing, my days of the market go back to zero. But if I'm only relisting the home five days later, my chemo live, today's is at five and then it starts going up from there.

Speaker 2: (13:22)
So you know, it's important for a buyer to be aware of how many days on the market a home is sitting there. Because for example, if it's been on the market for one day and your client or the buyer's ready to make an offer, you could probably assume that the is not going to be as negotiable and you probably need to act fast. Well what if there's a home that's been on the market for 200 days? You know, that might be a red flag as to is there something wrong with this home? Is it overpriced? You know, what are the factors leading to the higher days on the market? So, um, just things to, you know, be thinking of and looking into a little bit deeper asking those questions. You know, you can, as a buyer, you can ask your buying agent, Hey, can you ask the listing agent, you know, why is this home on the market?

Speaker 2: (14:07)
Why hasn't it sold? You know, has it just been bad luck? Maybe they went under contract several times only for the buyers to back out for no reasons, you know, just kind of what's happening with the history of this home. And so on the flip side then when it comes to sellers, it is just wonderful to make sure that you are working with an agent who does have low days in the market. And that should be kind of twofold because they have a great marketing plan. Now you don't want to work with a listing agent who has low days on the market because they are devaluing your home. You know, they are going in with a very low list price in order to get it sold quickly. So just make sure that you are asking numbers, ask them average days on the market, what is your list versus your sales price. You know, how many homes have you sold a really, you know, do your due diligence as a seller to make sure that you are choosing the right agent who not only can sell homes quit because they have an amazing marketing plan in place, but also are getting you top value as well.

Speaker 1: (15:06)
If I can, can I give you a second to, to brag a little bit? What, what's the average days on market for our area right now compared to what your team's doing?

Speaker 2: (15:15)
Sure, sure. Um, I, I haven't pulled them just recently, but I did for 2019 when we came to an end and a 2019 for the triangle MLS. Uh, the average agent in the triangle was at 27 days and our team was at 18. Okay. And those numbers might seem a little high, but you just have to remember there's some of them's that fly off the market in a day. And then there are others that are, you know, just they're going to take longer of course, but we, we are better than the rest. And then as far as lists versus sales price, we were at 99.9 and again, you know, that can be, I mean that's a great list for sales price, but you know, oftentimes we have homes that sell above asking price and other ones that we negotiate a little bit, you know, but overall across the board we have an amazing marketing plan in place and that's something that I share freely.

Speaker 1: (16:03)
Well, we go on listing presentations and we just do above and beyond really the average agent you've been listening to, the savvy real tour podcast. I'm Walter store Holt alongside Angie Cole. She's the owner and broker in charge of Aiko Realty here in the triangle. And if you have questions for Angie, we invite you to go online to a Cole realty.com listen to past podcast episodes on the website, read the blog and all the great information including the option to find a home right there on the website. That's a Cole realty.com and you can also call Angie with your questions. (919) 578-3128